If an insured's home value is $500,000 and they have a 3% deductible, how much would they pay if losses amount to $25,000?

If an insured's home value is $500,000 and they have a 3% deductible, how much would they pay if losses amount to $25,000?

• A. $15,000
• B. $10,000
• C. $7,500
• D. $5,000

Answer: (A)

To determine how much the insured would pay when experiencing losses amounting to $25,000 with a 3% deductible, it is crucial first to calculate the deductible amount based on the home value. The deductible is calculated as a percentage of the home's value. In this case, the home value is $500,000. A 3% deductible equates to: \[ 3\% \times 500,000 = 0.03 \times 500,000 = 15,000. \] This means that the insured is responsible for the first $15,000 of any loss before their insurance coverage starts reimbursing the remaining expenses. For the loss amount of $25,000, the insured would pay the deductible of $15,000 before their insurance kicks in to cover the rest. Therefore, the amount they would pay in this situation is indeed $15,000. It's important to recognize that since the deductible ($15,000) is less than the total loss amount ($25,000), the insured will cover the deductible completely, and the insurance will cover the remaining $10,000 of the losses.

To determine how much the insured would pay when experiencing losses amounting to $25,000 with a 3% deductible, it is crucial first to calculate the deductible amount based on the home value.

The deductible is calculated as a percentage of the home's value. In this case, the home value is $500,000. A 3% deductible equates to:

[

3% \times 500,000 = 0.03 \times 500,000 = 15,000.

]

This means that the insured is responsible for the first $15,000 of any loss before their insurance coverage starts reimbursing the remaining expenses.

For the loss amount of $25,000, the insured would pay the deductible of $15,000 before their insurance kicks in to cover the rest. Therefore, the amount they would pay in this situation is indeed $15,000.

It's important to recognize that since the deductible ($15,000) is less than the total loss amount ($25,000), the insured will cover the deductible completely, and the insurance will cover the remaining $10,000 of the losses.